55814 Federal Register / Vol. 71, No. 185 / Monday, September 25, 2006 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

negotiate fees lower than those posted 

in the rate schedule, they are reluctant 

to do so where the fees are disclosed to 

other prospective and existing 

customers. Applicants submit that the 

relief would allow the Adviser to 

negotiate more effectively with each 

individual Sub-Adviser. 

Applicants’ Conditions 

Applicants agree that any order 

granting the requested relief will be 

subject to the following conditions: 

1. Before a Fund may rely on the 

requested order, the operation of the 

Fund in the manner described in the 

application will be approved by a 

majority of the Fund’s outstanding 

voting securities, as defined in the Act, 

or, in the case of a Fund whose public 

shareholders purchased shares on the 

basis of a prospectus containing the 

disclosure contemplated by condition 2 

below, by the sole initial shareholder 

before offering the Fund’s shares to the 

public. 

2. Each Fund will disclose in its 

prospectus the existence, substance, and 

effect of any order granted pursuant to 

this application. Each Fund will hold 

itself out to the public as employing the 

management structure described in the 

application. The prospectus will 

prominently disclose that the Adviser 

has ultimate responsibility, subject to 

oversight by the Board, for the 

investment performance of a Fund due 

to its responsibility to oversee SubAdvisers and recommend their hiring, 

termination and replacement. 

3. Within 90 days of the hiring of a 

new Sub-Adviser, the affected Fund’s 

shareholders will be furnished all the 

information about the new Sub-Adviser 

that would be included a proxy 

statement, except as modified to permit 

the Aggregate Fee Disclosure. This 

information will include Aggregate Fee 

Disclosure and any change in such 

disclosure caused by the addition of a 

new Sub-Adviser. To meet this 

condition, the affected Fund will 

provide Fund shareholders within 90 

days of the hiring of a new Sub-Adviser, 

with an Information Statement meeting 

the requirements of Regulation 14C, 

Schedule 14C and Item 22 of Schedule 

14A under the Exchange Act, except as 

modified by the order to permit 

Aggregate Fee Disclosure. 

4. The Adviser will not enter into a 

Sub-Advisory Agreement with any 

Affiliated Sub-Adviser without such 

agreement, including the compensation 

to be paid thereunder, being approved 

by the shareholders of the applicable 

Fund. 

5. At all times, a majority of the Board 

will be Independent Directors, and the 

nomination of new or additional 

Independent Directors will be at the 

discretion of the then-existing 

Independent Directors. 

6. Whenever a Sub-Adviser change is 

proposed for a Fund with an Affiliated 

Sub-Adviser, the Board, including a 

majority of the Independent Directors, 

will make a separate finding, reflected 

in the Board minutes, that the change is 

in the best interests of the Fund and its 

shareholders and does not involve a 

conflict of interest from which the 

Adviser or the Affiliated Sub-Adviser 

derives an inappropriate advantage. 

7. Independent legal counsel, as 

defined in rule 0–1(a)(6) under the Act, 

will be engaged to represent the 

Independent Directors. The selection of 

such counsel will be within the 

discretion of the then existing 

Independent Directors. 

8. The Adviser will provide the 

Board, no less frequently than quarterly, 

with information about the profitability 

of the Adviser on a per-Fund basis. The 

information will reflect the impact on 

profitability of the hiring or termination 

of any Sub-Adviser during the 

applicable quarter. 

9. Whenever a Sub-Adviser is hired or 

terminated, the Adviser will provide the 

Board with information showing the 

expected impact on the profitability of 

the Adviser. 

10. The Adviser will provide general 

management services to each Fund, 

including overall supervisory 

responsibility for the general 

management and investment of the 

Fund’s assets, and, subject to review 

and approval by the Board, will: (a) Set 

each Fund’s overall investment 

strategies, (b) evaluate, select and 

recommend Sub-Advisers to manage all 

or a part of a Fund’s, (c) allocate and, 

when appropriate, reallocate a Fund’s 

assets among Sub-Advisers, (d) monitor 

and evaluate the performance of the 

Sub-Advisers, and (e) implement 

procedures reasonably designed to 

ensure that the Sub-Advisers comply 

with the relevant Fund’s investment 

objective, policies and restrictions. 

11. No director or officer of the 

Company, or director or officer of the 

Adviser, will own directly or indirectly 

(other than through a pooled investment 

vehicle that is not controlled by such 

person), any interest in a Sub-Adviser, 

except for (a) ownership of interests in 

the Adviser or any entity that controls, 

is controlled by, or is under common 

control with the Adviser, or (b) 

ownership of less than 1% of the 

outstanding securities of any class of 

equity or debt of a publicly traded 

company that is either a Sub-Adviser or 

an entity that controls, is controlled by, 

or is under common control with a SubAdviser. 

12. Each Fund will disclose in its 

registration statement the Aggregate Fee 

Disclosure. 

13. The requested order will expire on 

the effective date of rule 15a–5 under 

the Act, if adopted. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Nancy M. Morris, 

Secretary. 

[FR Doc. 06–8140 Filed 9–22–06; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–54463; File No. SR–NASD–

2006–100] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Delivery of 

Options Disclosure Documents 

September 15, 2006. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b-4 thereunder,2

notice is hereby given that on August 

17, 2006, the National Association of 

Securities Dealers, Inc. (‘‘NASD’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II and III below, which Items 

have been prepared by NASD. NASD 

filed the proposed rule change as a 

‘‘non-controversial’’ rule change under 

Rule 19b–4(f)(6) under the Act,3 which 

rendered the proposal effective upon 

filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NASD proposes to amend NASD Rule 

2860 (Options) to (1) require that a copy 

of each amendment to the options 

disclosure document, Characteristics 

and Risks of Standardized Options 

(‘‘ODD’’), be distributed to each 

customer not later than the time of the 

delivery of a confirmation of a 

transaction in the category of options 

issued by The Options Clearing 

Corporation (‘‘OCC’’) to which the 

amendment pertains and (2) clarify that 


rwilkins on PROD1PC63 with NOTICES
Federal Register / Vol. 71, No. 185 / Monday, September 25, 2006 / Notices 55815 

4See CBOE Rule 9.15; ISE Rule 616; Phlx Rule 

1029; Amex Rule 926; and NYSE Rule 726 

(collectively, ‘‘Options Exchanges’’). 5 15 U.S.C. 78o–3(b)(6). 

6 15 U.S.C. 78s(b)(3)(A). 

7 17 CFR 240.19b–4(f)(6). 

8See 15 U.S.C. 78s(b)(3)(C). 

revisions to the Special Statement for 

Uncovered Option Writers (‘‘Special 

Written Statement’’) be distributed to 

each customer approved for writing 

uncovered short options not later than 

the time of the delivery of a 

confirmation of a transaction in options 

issued by the OCC. The text of the 

proposed rule change is available on 

NASD’s Web site, http://www.nasd.com, 

at NASD’s Office of the Secretary, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NASD included statements concerning 

the purpose of, and basis for, the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. NASD has prepared 

summaries, set forth in Sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

NASD is proposing revisions to the 

requirement to deliver amendments 

and/or revisions to the options 

disclosure documents in NASD Rule 

2860 to conform to similar rules of other 

self-regulatory organizations.4

Specifically, NASD is amending the rule 

to more clearly delineate the particular 

delivery requirements applicable to the 

ODD and the Special Written Statement. 

Currently, NASD Rule 2860(b)(11)(A) 

requires that amendments and revisions 

to both disclosure documents be 

distributed to each customer not later 

than the time a confirmation of a 

transaction is delivered to each 

customer who enters into a transaction 

in options issued by the OCC. By 

contrast, the rules of the Options 

Exchanges require that amendments to 

the ODD be distributed to each customer 

not later than the time a confirmation of 

a transaction in the category of options 

to which the amendment pertains is 

delivered to such customer. 

NASD believes that the delivery of an 

amendment to the ODD is appropriately 

triggered by a customer transaction in 

an options contract to which such 

amendment pertains. Furthermore, the 

proposed rule change will harmonize 

NASD’s rule for amendments to the 

ODD with those of the Options 

Exchanges. 

In addition, through a new 

subparagraph (2), NASD is clarifying 

that revisions to the Special Written 

Statement be distributed to each 

customer having an account approved 

for writing uncovered short options not 

later than the time a confirmation of a 

transaction is delivered to each 

customer who enters into a transaction 

in options issued by the OCC. NASD 

states that the rules of the Options 

Exchanges do not address delivery of 

revisions to the Special Written 

Statement. 

NASD has filed the proposed rule 

change for immediate effectiveness. 

NASD will announce the 

implementation date of the proposed 

rule change in a Notice to Members to 

be published no later than 60 days 

following the filing of the rule change 

with the Commission for immediate 

effectiveness. The implementation date 

will be 30 days after the date of the 

Notice to Members. 

2. Statutory Basis 

NASD believes that the proposed rule 

change is consistent with Section 

15A(b)(6) 5 of the Act in that it is 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, and, in general, to protect 

investors and the public interest. NASD 

is proposing the rule change to 

harmonize NASD’s rule for delivery of 

amendments to the ODD with those of 

the Options Exchanges and to clarify 

members’ delivery obligations for 

revisions to the Special Written 

Statement. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASD does not believe that the 

proposed rule change will impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received from 

Members, Participants or Others 

NASD has neither solicited nor 

received written comments on the 

proposed rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the proposed rule change: (i) 

Does not significantly affect the 

protection of investors or the public 

interest; (ii) does not impose any 

significant burden on competition; and 

(iii) by its terms, does not become 

operative for 30 days after the date of 

filing, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 6 and subparagraph (f)(6) of 

Rule 19b–4 thereunder.7

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in the furtherance of the 

purposes of the Act.8

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASD–2006–100 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASD–2006–100. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 


rwilkins on PROD1PC63 with NOTICES
55816 Federal Register / Vol. 71, No. 185 / Monday, September 25, 2006 / Notices 

9 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6). 5 17 CFR 240.19b–4(f)(6)(iii). 

6See NASD Rule 4903(b). 

7 15 U.S.C. 78o–3. 

8 15 U.S.C. 78o–3(b)(6). 

9 15 U.S.C. 78s(b)(3)(A)(iii). 

10 17 CFR 240.19b–4(f)(6). 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of NASD. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NASD–2006–100 and 

should be submitted on or before 

October 16, 2006. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.9

Nancy M. Morris, 

Secretary. 

[FR Doc. 06–8141 Filed 9–22–06; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–54462; File No. SR–NASD–

2006–107] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Related to Thru Orders 

for Nasdaq’s INET Facility 

September 15, 2006. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on 

September 11, 2006, the National 

Association of Securities Dealers, Inc. 

(‘‘NASD’’), through its subsidiary, The 

Nasdaq Stock Market, Inc. (‘‘Nasdaq’’), 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by Nasdaq. Nasdaq has 

filed the proposal pursuant to Section 

19(b)(3)(A) of the Act 3 and Rule 19b–

4(f)(6) thereunder,4 which renders the 

proposal effective upon filing with the 

Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Nasdaq proposes to introduce a new 

Thru order type for Nasdaq’s INET 

Facility that will allow users to direct 

that their order be delivered by the INET 

system to the American Stock Exchange 

(‘‘Amex’’) or New York Stock Exchange 

(‘‘NYSE’’), as appropriate. Nasdaq has 

designated this proposal as noncontroversial and has requested that the 

Commission waive the 30-day preoperative waiting period contained in 

Rule 19b–4(f)(6)(iii) under the Act.5

The text of the proposed rule change 

is below. Proposed new language is 

italicized; proposed deletions are in 

[brackets]. 

* * * * * 

4956. Routing 

(a) INET Order Routing Process 

(1) The INET Order Routing Process 

shall be available to Participants from 7 

a.m. to 8 p.m. Eastern Time, and shall 

route orders as described below: 

(A) Routing Options. 

The System provides [eight] nine 

routing options for orders. Of these 

eight, [five] six—DOT Immediate , DOT 

Alternative, DOT Alternative 2, Reactive 

Only DOT, [and] DOT Nasdaq—and 

Thru DOT—are available for orders 

ultimately sought to be directed to 

either the New York Stock Exchange 

(‘‘NYSE’’) or the American Stock 

Exchange (‘‘AMEX’’). The System also 

allows firms to send individual orders 

to the NYSE Direct + System, and to 

elect to have orders not be sent to the 

AMEX. The [eight] nine System routing 

options are: 

(i)–(viii) No Change. 

(ix) Thru DOT (‘‘TDOT’’)—under this 

option, orders are sent directly to either 

the NYSE or AMEX, as directed by the 

entering party. If unexecuted, the order 

(or unexecuted portion thereof) shall be 

returned to the entering party. This 

option may only be used for orders with 

time-in-force parameters of either DAY, 

IOC, or market-on-open/close. 

(B) No Change. 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. Nasdaq has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Nasdaq proposes to create a new order 

routing option for its INET facility that 

would allow users to direct that their 

orders be delivered by the INET system 

to the NYSE or the Amex, as 

appropriate. Nasdaq notes that this 

direct delivery functionality already 

exists in Nasdaq’s Brut facility as the 

Thru Brut order 6 and would provide 

additional flexibility and functionality 

to INET system users that desire to send 

orders to the NYSE or the Amex. 

2. Statutory Basis 

Nasdaq believes that the proposed 

rule change is consistent with the 

provisions of Section 15A of the Act,7 in 

general, and with Section 15A(b)(6) of 

the Act,8 in particular, in that it is 

designed to promote just and equitable 

principles of trade, and to remove 

impediments to a free and open market 

and a national market system. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Nasdaq does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing proposed rule change is 

subject to Section 19(b)(3)(A)(iii) of the 

Act 9 and Rule 19b–4(f)(6) thereunder 10

because the proposal: (i) Does not 

significantly affect the protection of 

investors or the public interest; (ii) does 

not impose any significant burden on 


rwilkins on PROD1PC63 with NOTICES